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European, US Stocks Hammered by Finance Sector Woes

Feb. 8, 2016
Focus turned to the banking sector, but the rout deepened after oil prices also resumed their slide, while tech stocks got taken down on Wall Street.  

LONDON—European and U.S. stock markets slumped on Monday as investors cashed out of banking shares, with tech and oil stocks also taking a beating.

After a quiet session across Asia owing to the Chinese New Year, European markets plunged and were then followed by Wall Street.

Markets across the continent ended the day down with losses of around 3 percent or more.

Milan fell 4.7% and Greek stocks dropped 7.9% to a 25-year low. Meanwhile Frankfurt's DAX even went below 9,000 points for the first time since October 2014.

"I don't think there's any new information investors are digesting, it's still part of this negative momentum trade," said Jack Ablin, chief investment officer at BMO Private Bank.

Focus turned to the banking sector, but the rout deepened after oil prices also resumed their slide, while tech stocks got taken down on Wall Street.

"Banking shares across Europe buckled under the pressure of global growth concerns in concert with the ugly spectre of negative interest rates," said market analyst Jasper Lawler at CMC Markets UK.

Disappointing earnings by banks has turned investors cold, especially given the prospect of continued low or even negative interest rates in many countries.

Banking shares were among the worst performers, with Bank of America, Morgan Stanley and Goldman Sachs losing more than 5%

In Europe, shares in Deutsche Bank plunged 13.7 percent and Commerzbank slumped 6.6 percent.

Shares in BNP Paribas gave up 5.5% and HSBC shed 4.2%.

Meanwhile in Athens, the FTSEB index of financial stocks plunged by nearly 25% as investors worried about another dispute between the Greek government and its EU-IMF creditors like one last year which wiped out the value of bank capital.

As oil prices fell again, energy stocks took another hit.

Among petroleum-linked stocks, Anadarko Petroleum dropped 2.8% and oil-services company Weatherford International fell 3.2%.

Shares in BP fell 1.9% in London.

Tech Still Generously Priced 

Meanwhile, tech stocks took another thumping in the wake of shares in career-focused social network LinkedIn plunging more than 40% on Friday after reporting a weak outlook.

While LinkedIn shares were broadly stable, Amazon dropped 4.7% and Facebook 5.0%.

"Even after having fallen over 10% from record highs, top U.S. tech stocks are still very generously priced, which doesn’t allow for the kind of growth slowdown indicated in some earnings reports," said Lawler.

In foreign exchange meanwhile, the dollar gave capitalised on gains won thanks to an increased chance of another U.S. rate rise this year.

Friday's latest monthly jobs report showed that US hiring eased in January but that the unemployment rate slipped to 4.9% and wage growth increased modestly.

"The U.S. dollar was mostly stronger on Monday, continuing the positive momentum from" last week's job report, said Lawler.

"It's far from a foregone conclusion that the Fed will raise rates in March, even this year, but the faster wage growth means its back on the table and the dollar is reflecting that," he said.

Markets were said to be reacting also to weekend news that China's foreign exchange reserves had fallen to their lowest level in more than three years, as Beijing sells dollars to stop the yuan from depreciating further.

The world’s largest currency hoard shrank by $99.5 billion in January to some $3.2 trillion, the People’s Bank of China said on its website, the lowest since May 2012.

Worries about China's economy, the world's second biggest, have pushed the yuan to a five-year low. The country saw its first-ever annual decline in foreign exchange reserves last year as Beijing tried to prevent a more drastic devaluation.

Copyright Agence France-Presse, 2016.

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